Allianz, the German insurance group, has little in common with small domestic companies such as Surteco, a paper and plastics maker, or Fresenius, a medical products group. SCOR, the French reinsurance company, could be considered a European peer. But what of Istrokapital, a Slovakian financial services group?

What binds them is their adoption, proposed or planned, of Societas Europaea status, or European limited company. Allianz announced last week – symbolically in Brussels – that it had become the first big European company to complete SE legal formalities, and lauded the benefits of its new status. But will this lead to other companies embracing the new standard? Or will businesses see it as a waste of time, another example of Brussels meddling where it has no business?
The SE has had a difficult birth. Discussion about its introduction started 35 years ago in the early days of the Common Market. It took until 2001 for the plans to reach the European Union statute books.
Since then, many member states, which were originally scheduled to ratify the SE by October 2004, have been slow to do so. Germany, France, Luxembourg and the Netherlands have been the most enthusiastic, so it is unsurprising that companies seeking SE status come from these markets.
For Allianz, one important business benefit is that it can pool its cash reserves in a single euro account without administrative hindrance. The same principle applies to its reinsurance contracts, which will no longer have to be drawn up across different jurisdictions.
Another benefit for the German insurer is that by incorporating itself as a European company it has trimmed the size of its management board and, more politically, the number of worker seats on it.

Allianz chief executive Michael Diekmann said: “We always felt that in decisions where you had 20 representatives on the supervisory board and 11 on the management board, you were running conferences of 31 people. If everyone took five to 10 minutes to comment on each topic, it could go on for a long time.”

It now has six worker representatives and six management representatives on the supervisory board. Of the 12, more than half are from subsidiaries outside Germany. In turn, the company has introduced an SE works council with 37 members from 24 countries, including 10 from Germany and three each from Italy, France and the UK. The move makes the structure of Allianz more European and less prone to domestic trouble about restructuring plans.

Allianz has announced it is cutting 7,500 jobs in Germany but its plans, launched as profits soar, have come under fire from unions which have staged strikes around the country.
On a broader level, the transfer to a European company masks political ambitions, at least for Allianz.
Diekmann said large European companies could push for a single financial services regulator based in Brussels that would differentiate between the needs of large European companies and small domestic companies.
To this end, Diekmann’s Brussels trip involved meetings with EU representatives ahead of the forthcoming German presidency of the union. Allianz is lobbying the German government: “We operate in 29 European countries under 48 regulators. It’s a complex and onerous system, which we don’t believe is relevant today. What is really needed is a European supervisor where we could have one reporting structure instead of the 48 we have today. We also believe we need to have one set of rules with regards to consumer policy because at the moment every nation has its own consumer protection bodies that make it difficult to sell products across Europe.”
If Allianz can set up its product range to take advantage of legislation changes, Diekmann believes there will be a significant advantage in its adoption of the SE.
The common factor among the companies taking SE status is a cross-border merger to absorb. SCOR, the French reinsurance company, decided to adopt SE status after it bought out its German and Italian subsidiaries. It said the status made it easier to bring a tripartite merger under one jurisdiction.
Diekmann said Allianz had used the European company principle to “clean up” its merger with RAS, an Italian bank, and its subsequent buyout of its minority shareholders. RAS was delisted in Italy two weeks ago.
He said: “The advantage is you can reduce the legal structures that are necessary for the group down to one and have a much more streamlined ownership structure.” Industry observers believe it will only be a matter of time before Allianz carries out a similar operation to buy out the 38% it does not own of French insurance company AGF. Diekmann declined to be drawn on such plans.
Other benefits are questionable. Under SE status, company accounts can be produced for the European company rather than be submitted in each European jurisdiction in which it operates. This will save money, although hardly the €90m ($113m) that Allianz spent becoming SE compliant. On the more obvious lure of cross-border tax savings, the SE structure makes no difference while European fiscal harmonisation remains a pipe dream.
Today, Allianz stands out as the only big European group to take the plunge. Diekmann argues that the stalled legislation is holding back its European peers: “There have been a lot of enquiries to our legal department from other companies, but the problem is that the rules have not been adopted in other European countries.
“Also, it is a fresh concept and companies are looking for the economic trigger to do it. International associations such as the European Insurance Committee and the European Round Table of Industrialists are working hard to support this.”
Peter Goes, a partner with law firm Linklaters in Amsterdam, believes the SE concept could be stillborn.
He said the principle of facilitating cross-border restructuring had been surpassed by European Union case law. “There was a recent ruling concerning a German company prevented from consolidating a cross-border merger into Germany, which it won,” he said.
“What it means is that the founding principle of the SE is now written into law, so there’s no need to go through the cumbersome formalities of becoming an SE for most companies that are looking to simplify a cross-border deal,” he said.

• SE success hinges on companies seeing benefits

The success of the Societas Europaea concept will hinge on how it benefits companies compared with the British or French equivalent.
An SE is covered by European Union, not domestic, law. Its main advantage is that companies established in EU member states can merge and operate using a single set of rules and a unified management and reporting system.
This avoids setting up expensive, bureaucratic subsidiaries governed by national laws and reduces administrative and legal costs.
The statute allows an SE registered in one member state to move its registered office to another without having to wind it up and re-register. It is not taxed for such a move as other companies may be.
Another advantage is that for European infrastructure projects, such as rail or energy networks, a single European company could attract private equity money more easily than national companies operating under different laws.
An SE must be registered in the country in which it has its administrative head office.
However, it does not enjoy tax advantages and is treated like any other multinational company. Nor does the SE have any advantage in setting employment contracts or pensions, which remain subject to national law.
But an SE could benefit from the 2000 EU law on occupational retirement provision, which allows for a company to set up a single pension fund for employees throughout the EU.
The creation of an SE requires negotiations on the involvement of employees with a body representing all staff of the companies concerned.
SE companies do not need to be listed and private and medium-sized companies may also register. If its shares are quoted, the SE is treated in the same way as public companies established under national law.
EU officials are convinced of the advantages of the scheme. However, companies may not think the benefits outweigh the cost and time involved in setting up an SE.